OUTSOURCING TREND

According to a recent study released by PricewaterhouseCoopers, top US companies are increasingly turning to business process outsourcing. Based on interviews with senior executives at more than 100 US companies averaging about $4.4 billion in yearly revenue, the study shows that around 73 percent of US companies in the sample, presently outsource one or more business processes to external service providers.

The slowing domestic economic growth in the US, forcing companies to conserve costs is being stated as a prime driver of the IT-enabled outsourcing market. In fact, global outsourcing is being recognized by savvy executives as a strategy to help companies focus on core capabilities and provide bottom line benefits.

Source: Gartner

Fast eroding bottom lines in a global recessionary economy and the cost competitiveness of overseas ITES services providers is increasingly making global giants meaningfully examine them as an attractive IT-enabled services outsourcing providers. As more and more companies turn to "specialist" players to handle significant portions of their in-house functions and activities, global outsourcing is taking the form of a major trend.

A study by Gartner on the emerging BPO market, shows that BPO services Worldwide will grow from US$ 119 billion in 2000 to US$ 234 billion in 2005 at an 14.4 percent compound annual growth rate CAGR). By 2005, the number of outsourced business processes will have doubled as compared to the existing numbers, the study states. Gartner's study by geography shows that the pattern of BPO is cantered around the US market which in revenue terms accounted for US$ 70.6 billion of the overall industry. The trend is likely to continue till 2005 as the US is expected to outsource US$ 135.9 billion worth of business. The Gartner study also indicates that Europe, Asia Pacific, Japan, Canada and the rest of the world, will account for the remaining contributions.

The Gartner study shows that in terms of the processes being outsourced, Human resources lead the way with an existing share of US$ 33.4 billion (out of a total of $119.4 billion). Supply chain management, payment services, sales, marketing and customer care, finance and accounting and administration are the other contributors. This trend is likely to continue until 2005 with the mix remaining the same.

Source: Gartner

Human resources, as the Gartner study indicates, will grow rapidly as companies search for the critical employees required to meet expansion needs as well as the need for changing skill sets as the information society evolves.